BAKU, Azerbaijan, May 13
By Leman Zeynalova – Trend:
Oil companies can expect a robust recovery in the post-pandemic period, Trend reports citing Wood Mackenzie research and consulting company.
“Oil consumption in Q2 2020 is down more than 12 percent on the same period of 2019. Some of that demand is already starting to come back, and it looks as though April will turn out to have been the worst month in terms of the global oversupply of oil. But the evidence suggests we should not expect a rapid return to conditions before the pandemic,” the company said in its report.
The pandemic may not mean that the world reaches “peak demand” for oil any sooner, but the rate of growth out to 2040 could be much slower than in recent decades, according to Wood Mackenzie.
A combination of weaker economic growth, changes in consumer behaviour, and government policies could put a brake on oil consumption for many years, the company says.
“Oil companies planning for the post-pandemic future can expect a robust recovery in the short term as activity resumes, but will have to be prepared for a flatter growth outlook beyond that,” reads the report.
Wood Mackenzie suggest three scenarios for the oil market in the post-pandemic period.
The ‘Full recovery’ scenario models a strong rebound in the world economy, with the level of global GDP rapidly returning to where it would have been without the effect of the pandemic. That scenario converges with Wood Mackenzie’s base case view from the end of last year: oil demand rises out to the mid-2030s, and then starts to decline in the second half of the decade.
In the other scenarios, projecting a greater impact from the coronavirus and/or from government policies, the outlook for oil is weaker. The ‘Go it alone’ scenario reflects a retreat from globalisation, with a deeper downturn and slower trend growth thereafter. In that world, oil demand in 2030 is projected to be lower than it would have been in 2023 had the pandemic not hit.
The ‘Greener growth’ scenario, based on the ‘Accelerated energy transition’ that Wood Mackenzie set out last year, also points to weaker oil consumption. In this version, programs such as the European Green Deal, and the Green New Deal advocated by many Democrats in the US slow the rise in oil use through tighter fuel efficiency standards and the electrification of transport. Oil demand plateaus in the 2020s, before starting to fall steeply in the 2030s.
“Reality is likely to mix and match different elements from these scenarios. Some regions will push hard on the accelerator for the energy transition, while others focus more on developing domestic manufacturing industries and protecting existing energy producers. But most of the likely changes work in the same direction: towards weaker oil demand growth,” said Wood Mackenzie.
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